If you’re looking to raise funds as an HMO property owner or save money on your mortgage deal, consider an HMO remortgage. You can refinance your HMO property to release some of its equity or get a better rate than you have with your existing deal.
Why might you want an HMO remortgage?
There are lots of reasons why you might want to remortgage your HMO property. Typically, being able to release some of the equity that’s tied up in your property or wishing to get a better mortgage deal than you have now are the two main reasons.
When it comes to releasing equity, your lender will need to know what you intend to use it for. For example, you might want to carry out improvements to your property, consolidate some debts or use it as a deposit to buy a new investment property.
What equity can you release from your HMO property?
Lenders vary with their criteria but you can generally expect a maximum loan-to-value (LTV) ratio of 75–85%. The lender may have a minimum loan value requirement, such as £25,000.
Many lenders expect you to have owned the property for a minimum period, such as 6 months, before remortgaging. However, our mortgage brokers know which lenders are prepared to offer HMO remortgages without this requirement. That way, you can move forward with your plans sooner rather than later. For example, you may have used all of your available funds to buy a property at auction but need to release some cash to renovate it before letting it out.
Affordability for an HMO remortgage
The lender will assess your affordability for a remortgage based on the rental income of your HMO property. The rental income usually needs to be a set percentage above the mortgage payments, such as 25–45% higher. In some situations, lenders may consider your personal income if the rental income falls below the requirement. This is known as top slicing. If you’re a portfolio landlord, your other properties will be taken into account.
Prepare your documentation for an HMO remortgage
It’s recommended to get your documentation ready before applying for an HMO remortgage. This allows our mortgage brokers to approach the right lenders on your behalf and negotiate for the best HMO remortgage rates and terms. Having your documentation prepared in advance also speeds up the application process and ensures that it runs smoothly. The paperwork you need generally includes:
- Details of the assured shorthold tenancy (AST) agreements
- Copies of your last tax return or payslips
- Your HMO licence, if applicable
- Planning permission details
- Information relating to other properties you own
Prepare your HMO property for the valuation
The lender will require a valuation to be carried out so prepare your property in advance to maximise its potential. Deal with any minor works or redecoration that needs doing and make sure that any external areas are tidied up. Ask your tenants to ensure that their rooms look clean and tidy and are accessible for the surveyor’s visit.
Get expert help with your HMO remortgage
As a niche product, our HMO mortgage and remortgage specialists can save you time, money and stress with your application. Many lenders only offer their products via brokers so you can rest assured that you’ll have access to all of the HMO remortgage deals that meet your needs.
Our brokers will negotiate on your behalf to secure the best rate and terms. When you’re ready to proceed, your dedicated mortgage broker will oversee your application from start to finish to ensure that it runs smoothly.
Whether you want to release some equity, are looking for a better mortgage rate, need a quick turnaround or want to refinance in the early stages of your HMO property ownership, we can help. Just give us a call on 01322 907 000 to get started. We can also help with other aspects of your property ownership, such as arranging your HMO insurance.